Arbitrage in the foreign exchange market: Turning on the microscope

If markets are efficient, then there are no exploitable arbitrage opportunities. But if no one engages in arbitrage, then what eliminates such exploitable opportunities? This column puts international financial markets under the microscope and shows that arbitrage opportunities exist, but they are usually eliminated in less than five minutes. Such micro-arbitrage makes the assumption of no arbitrage safe for those looking at the bigger picture.